While the New Hanover County Board of Commissioners’ move toward a sale of New Hanover County Regional Medical Center has received much public attention, a parallel effort has not.
That effort – laying the groundwork for a community foundation that would invest and manage more than $1 billion from the proposed sale to Novant Health – has been undertaken by county management.
The investment of those funds and the expected income from that investment could vary significantly depending on how the foundation’s governance is structured, said Lisa Wurtzbacher, New Hanover County’s chief finance officer. Wurtzbacher presented some of the related issues to the commissioners at their Sept. 21 meeting.
If the foundation is considered a governmental agency, investment of its so-called “idle funds” must be done in accordance with the N.C. General Statute 159-30.
The statute, Wurtzbacher said at the meeting, “restricts investments to 12 types, most of which are low-risk and low-yield. We’re trying to structure the foundation so it is not bound by the statute.”
While there is no way of predicting how the markets are going to behave, she continued, NCGS 159-30-approved investments have an average yield of 2.81%. If, however, the foundation had a wider range of investment options, “it would be reasonable to assume the foundation portfolio could generate 5% in income.”
Several commissioners have pointed out that a foundation subject to the statute would be more limited in its community impact, said County Manager Chris Coudriet in an interview Sept. 28.
“If the foundation was subject to 159-30, the annual proceeds would be significantly different, and it would be unable to do the same amount of good work in the community,” he said. “A 2% annual return versus a 5% annual return would significantly affect what the foundation would be able to do year over year.”
The plan would be to use only that income from the $1.25 billion to fund projects and agencies that would advance the health and wellbeing of the county, Wurtzbacher said.
“The real goal is that [the principal] grows over time,” she said. “The foundation will have an investment plan and an allocation plan. The board will do what they think is right.”
Coudriet added that there will be a methodology governing budgeting for the foundation’s outflow, based on a five-year rolling average of the income, so that there would not be peaks and valleys in funding levels for community projects.
In exploring ways to constitute the foundation so it would not be considered an agency of local government, New Hanover County has consulted the state’s Local Government Commission.
“The LGC staff has offered an opinion that the foundation … would possibly be considered an agency of New Hanover County and therefore subject to NCGS 159-30,” county spokeswoman Jessica Loeper wrote in a memo last Friday. “They found facts that would exempt the foundation from investment oversight and also found facts that would subject it to investment oversight. The NC Treasurer and Commission have not offered an opinion on this, so this is just the opinion of the LGC staff based on the framework presented for the foundation earlier this month.”
While there are several factors that would affect this determination, Coudriet said, one obvious one is the composition of the foundation’s board.
If the county appointed the majority of the 11-member board, it would be seen as controlling the foundation, thus making the foundation an agency of local government.
Wurtzbacher said that the foundation’s draft bylaws currently specify that the county would appoint five board members, with the remaining six would be appointed by the NHRMC board.
Coudriet explained that, assuming the sale goes through, the NHRMC successor board would have 17 members and be self-perpetuating, with general oversight by the Novant corporate entity. It would have no connection to New Hanover County.
“It’s not just the [composition of] the foundation board that determines whether the foundation is an agency of county government; there are other factors too,” he said. “There are other things that we have to achieve to absolutely exempt it [from NCGS 159-30]. But we think that the county appointing the minority of members is the ‘first among equals’ issue.”
New Hanover County commissioners are slated to vote Oct. 5 about the final agreement with Novant as well as the bylaws for the proposed community foundation.